HomeMy WebLinkAboutStaff Report 1827City of Palo Alto (ID # 1827)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 7/18/2011
July 18, 2011 Page 1 of 2
(ID # 1827)
Summary Title: Renewable Feed-in Tariff Policies and Guidelines
Title: Finance Committee Recommendation to Approve Policies and Guidelines
for a Renewable Energy Feed-in Tariff
From:City Manager
Lead Department: Utilities
Recommendation
Staff, the Finance Committee, and the Utilities Advisory Commission (UAC) recommend that the
City Council adopt the proposed Renewable Energy Feed-in-Tariff Policies and Guidelines
(Attachment A).
Executive Summary
A Feed-in-Tariff (FIT) is a purchasing mechanism that enables owners of small local renewable
generators (primarily rooftop solar panels) to sell power to the electric utility for a fixed price.
The electric utility is in turn able to include the energy in its supply portfolio and count it
towards its Renewable Portfolio Standard (RPS). Earlier this year staff completed an initial
evaluation of renewable FITs as a method of purchasing renewable power. The attached
policies and design guidelines reflect staff’s proposed approach to FIT program development. If
the policies and design guidelines are approved, staff would return to City Council for approval
of the detailed program later this year with the goal of launching the program in early 2012.
Committee Review and Recommendations
At the June 7, 2011 meeting of the Finance Committee staff presented the attached Policies
and Guidelines. The Committee asked various questions but was generally supportive of the
staff proposal. After discussion, the Finance Committee unanimously recommended approval
of the Policies and Guidelines with clarifications of the language in Policy 1 and Program Design
Guidelines 1a and 1b.
Attachments:
·Attachment A: Proposed Renewable FIT Polices and Design Guidelines(PDF)
·Attachment B: Staff Report ID 1641, Renewable Feed-in Tariff Policies and Guidelines(PDF)
·Attachment C: Excerpt of Minutes of June 7, 2011 Finance Committee Meeting (PDF)
July 18, 2011 Page 2 of 2
(ID # 1827)
Prepared By:Jon Abendschein, Resource Planner
Department Head:Valerie Fong, Director
City Manager Approval: James Keene, City Manager
City of Palo Alto Utilities (CPAU) Proposed Renewable Energy Feed-In-
Tariff (Renewable FIT) Program Policies and Guidelines
POLICIES
1. The Renewable FIT program’s objective is to fulfill the City of Palo Alto (City)’s
Renewable Portfolio Standard (RPS) from local renewable sources.
2. Enrollment will be capped at the amount of energy projected to be required to fulfill the
City’s RPS.
3. Eligible resources will include those that are deemed renewable by the California Energy
Commission (CEC) and that can be included in meeting RPS goals including solar
photovoltaic (PV) systems, wind, and biogas-fueled generators.
4. Eligible resources are to be located in the City and connected to the distribution system on
CPAU’s side of customer meters.
5. The Renewable FIT rate, set as a fixed-price in cents per kilowatt-hour (kWh) for a twenty-
year term, will be based on CPAU’s avoided energy and capacity cost (i.e., value-based) and
may vary by load shape for each renewable resource type.
6. The agreement between CPAU and program participants will be a non-negotiable, twenty-
year standard contract available to all eligible resources.
7. Program participants will be responsible for direct costs associated with the project (such as
interconnection and metering).
8. Projects with a Renewable FIT will not be eligible for a net metering tariff or incentives
under the PV Partners Program, the Power from Local Ultra-clean Generation Incentive
(PLUG-In) Program, or any other CPAU-funded incentive program.
9. City Council must approve the Renewable FIT rates, standard contracts and updates.
PROGRAM DESIGN GUIDELINES
1. The methodology for calculating avoided cost should include all of the following that apply
to the technology in question:
a. The market price of the renewable energy;
b. The value associated with fulfilling or reducing California Independent System
Operator (CAISO) requirements that the utility provide a minimum amount of capacity
within the Greater Bay Area, otherwise known as “local capacity requirements;”
c. Avoided transmission charges, transmission losses, and other CAISO charges;
d. Avoided distribution losses; and
e. Any other avoided costs attributable to local renewable generation
2. A standard contract will be established and published. The term will be 20 years.
3. A program cap will be established.
4. Maximum and minimum limits on individual project sizes may be used to limit the number
of projects or the risk associated with the operation of any single project. These may be
differentiated by technology type.
5. Updates to rates, contract terms, or program size should occur at regular scheduled intervals
or should involve substantial advance notice to project developers.
6. Metering requirements will be designed to meet any applicable California Independent
System Operator (CAISO), Northern California Power Agency (NCPA), and City
operational requirements.
7. Interconnection rules will be established or modified to ensure FIT projects meet all City,
NCPA, and CAISO operational requirements. Interconnection rules may be modified on a
schedule independent of the FIT update schedule.
8. The FIT program will be designed similarly to FIT programs in other utility service areas
where desirable, reasonable and feasible.
City of Palo Alto (ID # 1641)
Finance Committee Staff Report
Report Type:Meeting Date: 6/7/2011
June 07, 2011 Page 1 of 4
(ID # 1641)
Summary Title: Renewable Feed-in Tariff Policies and Guidelines
Title: Approval of Policies and Guidelines for a Renewable Energy Feed-in Tariff
From:City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that the City Council adopt the proposed Renewable Energy Feed-in-Tariff Policies
and Guidelines (Attachment A).
Executive Summary
A Feed-in-Tariff (FIT) is a purchasing mechanism that enables owners of small local renewable
generators (primarily rooftop solar panels) to sell power to the electric utility for a fixed price.
The electric utility is in turn able to include the energy in its supply portfolio and count it
towards its Renewable Portfolio Standard (RPS). Staff recently completed an initial evaluation
of renewable FITs as a method of purchasing renewable power and is now proceeding to design
a program. The attached policies and design guidelines reflect staff’s proposed approach to FIT
program development. If the policies and design guidelines are approved, staff would return to
City Council for approval of the detailed program later this year with the goal of launching the
program in early 2012.
Background
On March 7, 2011, Council unanimously approved the Long-term Electric Acquisition Plan
(LEAP) Objectives, Strategies and Implementation Plan (Staff Report 1317). LEAP Strategy #3
(RPS) and Strategy #4 (Local Generation) require the evaluation of the use of FITs to meet the
City of Palo Alto (City)’s RPS goal of supplying 33% of its power from renewable sources by 2015
and to encourage the development of local ultra-clean generation. Earlier this year staff
evaluated the use of FITs in Palo Alto and held study sessions with the UAC. Based on that
evaluation staff proceeded with the development of the proposed FIT Policies and Guidelines
(Attachment A), which were reviewed by the UAC on April 6, 2011.
Discussion
The City has an RPS goal to supply 33% of its power from renewable sources by 2015 while not
exceeding a 0.5 ¢/kWh impact on rates. Power from currently committed renewable resources
is expected to meet approximately 30.8% of the City’s annual electric energy needs in 2015
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leaving a gap of approximately 23,000 MWh/year, or 2.2% of load, to meet the 33% RPS goal by
2015. Part of this gap could be filled with power procured through a renewable FIT program.
The renewable FIT program that staff is designing will be “value-based”, meaning that it is
based on the value of the energy to the City. The alternative is a “cost-based” FIT, which is
based on the cost to build and operate the generator and is designed to guarantee a rate of
return to the developer even if it means setting the rate higher than the value of the energy to
the utility. Unlike a cost-based FIT, a value-based FIT will not increase the City’s cost of
renewable power over other power purchasing methods because it is based on the market
value of the power.
Given current market prices, if the remainder of the City’s RPS goal were achieved using only
local renewable sources purchased through the FIT program, staff believes the total cost of the
City’s renewable power supply would have less than a 0.5 ¢/kWh impact on rates, the goal
included in the LEAP. It is worth noting, though, that a FIT program will have higher contract
and program administration costs than the City’s traditional purchasing methods because it
involves many small contracts rather than fewer larger ones.
Under a FIT program, the City will offer a fixed long-term rate and standard power purchase
agreement (PPA) to any developer of an eligible generator in Palo Alto. Eligible technologies
will initially include solar, wind, and biogas fueled generators. If developers’ projects fit the
program guidelines, they would be able to sign up for the standard contract and rate unless the
program is already fully subscribed. For example, if the City offered a program with the
following terms: a fixed rate of 15 cents per kilowatt-hour (¢/kWh) for 20 years, any solar
developer willing to build a project in Palo Alto by the deadline, follow the program rules, and
agree to the standard contract terms could apply for the program and sign a 20-year PPA to sell
power at 15 ¢/kWh so long as there was still capacity remaining in the program.
The proposed Renewable FIT Policies and Guidelines (Attachment A) will be the basis for the
program. Below are some of the key features of the Polices and Guidelines:
1.The FIT will be value based.
2.A standard non-negotiable contract will be used.
3.Fixed rates will be available for solar, wind, and biogas-fueled generators.
4.Rates will take into account the value of the project to the utility, including the
renewable attributes, avoided transmission and distribution costs, local capacity value,
and the time of day the technology typically generates electricity.
5.The contracts will require the transfer of all energy, green attributes, and capacity
attributes (if applicable) to the utility.
The FIT program differs from the Request for Proposal (RFP) process, the method the City has
used to-date to purchase renewable power. In an RFP process several developers offer
projects, then the utility chooses the developers with the lowest priced feasible projects, and
negotiates PPAs with each one. An RFP process has worked well for obtaining contracts from
larger projects, but the costs and uncertainty associated with preparing a bid are too high for
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small local developers. A FIT program will reduce costs and provide local renewable project
developers certainty because of the fixed long-term rate, the standard contract, and the fact
that it is open to any developer rather than only those who are selected through an RFP
process.
In addition to enabling smaller developers to supply power to the City, a FIT program can
deliver benefits to other stakeholders as well, including:
·Benefits to the utility, such as the fact that renewable energy is generated locally, meaning
lower transmission costs than for remote renewable resources. Also, local generation can
help maintain regional (Bay Area) electric grid stability, which can result in financial benefits
to the utility
·Benefits to the site owner, including additional revenue from power sales or roof rental. A
FIT can also provide a way for owners of multi-unit commercial rental properties to take
advantage of distributed generation. Under traditional incentive programs like the City’s
Photovoltaic (PV) Partners program, the solar projects are typically built behind the
customer meter, offsetting their consumption. This benefits the utility customer rather
than the building owner, meaning there is less incentive for the building owner to install
solar panels.
·Benefits to the community, such as the potential for money spent on renewable power to
return to the community. The community can also take pride in generating renewable
power locally.
Timeline
Upon Council approval of the renewable FIT Policies and Guidelines, staff will proceed with
program design and bring a proposal to Council in December 2011. The program will include
fixed rates, the standard contract, program rules (such as minimum system size and deadlines
for project progress), the amount of capacity to be procured, and any other necessary changes
to the City of Palo Alto Utilities (CPAU) rules and regulations, such as interconnection
agreements or metering requirements. Staff’s objective is to obtain Council approval in time to
launch the program in early 2012.
Commission Review and Recommendation
Staff held two study sessions related to FITs with the UAC, one on February 2, 2011 and the
second on March 2, 2011. At these meetings the UAC supported the adoption of a FIT for local
renewable generators as long as it was based on the value of the energy to the utility and not
on the cost of generation. The proposed Renewable FIT Policies and Guidelines are aligned
with the UAC’s preference.
On April 6, 2011 the UAC reviewed the proposed policies and design guidelines for a value-
based FIT and unanimously recommended that the Council approve them. The minutes of that
meeting are provided as Attachment B.
Resource Impact
Aside from the staff time associated with designing and launching the program, there wil be
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some additional ongoing cost associated with program administration and interconnection and
permitting of new solar projects. The costs will depend significantly on the number of projects
that participate in the program, and may range from a negligible staff impact to 2/3 of an Full-
Time Equivalent or more. Most of these costs are related to permitting and interconnection,
meaning the costs would be recovered by the City’s existing permit fees. At this time staff does
not anticipate a need for additional permanent staffing, but will return with a more in-depth
projection of costs and staff time associated with the program when returning with the detailed
program design this fall. Any necessary additional resources would be requested via a Budget
Amendment Ordinance or through the Budget Process.
Policy Implications
The proposed Renewable FIT Policies and Guidelines help meet the Council-approved objectives
under LEAP Strategy #3 (Renewable Portfolio Standard, or RPS) and LEAP Strategy #4 (Local
Generation) and support the Council-approved Energy Risk Management Policies, and
Comprehensive Plan Goal N-9 (a clean, efficient, competitively-priced energy supply that makes
use of cost-effective renewable resources).
Enviromental Review
Approval of the proposed Renewable FIT Policies and Guidelines does not meet the definition
of a project pursuant to Public Resources Code Section 21065, thus no California Environmental
Quality Act review is required.
Attachments:
·Attachment A: Proposed Renewable FIT Policies and Design Guidelines (PDF)
·Attachment B: Excerpted Draft UAC Minutes of April 6, 2011 (PDF)
Prepared By:Jon Abendschein, Resource Planner
Department Head:Valerie Fong, Director
City Manager Approval: James Keene, City Manager
City of Palo Alto Utilities (CPAU)
Proposed Renewable Energy Feed-In-Tariff (Renewable FIT) Program Policies and
Guidelines
POLICIES
1. The Renewable FIT program’s objective is to maximize fulfillment of the City of Palo
Alto (City)’s Renewable Portfolio Standard (RPS) from local renewable sources.
2. Enrollment will be capped at the amount of energy projected to be required to fulfill the
City’s RPS.
3. Eligible resources will include those that are deemed renewable by the California Energy
Commission (CEC) and that can be included in meeting RPS goals including solar
photovoltaic (PV) systems, wind, and biogas-fueled generators.
4. Eligible resources are to be located in the City and connected to the distribution system
on CPAU’s side of customer meters.
5. The Renewable FIT rate, set as a fixed-price in cents per kilowatt-hour (kWh) for a
twenty-year term, will be based on CPAU’s avoided energy and capacity cost (i.e., value-
based) and may vary by load shape for each renewable resource type.
6. The agreement between CPAU and program participants will be a non-negotiable,
twenty-year standard contract available to all eligible resources.
7. Program participants will be responsible for direct costs associated with the project (such
as interconnection and metering).
8. Projects with a Renewable FIT will not be eligible for a net metering tariff or incentives
under the PV Partners Program, the Power from Local Ultra-clean Generation Incentive
(PLUG-In) Program, or any other CPAU-funded incentive program.
9. City Council must approve the Renewable FIT rates, standard contracts and updates.
PROGRAM DESIGN GUIDELINES
1. The methodology for calculating avoided cost should include all of the following that
apply to the technology in question:
a. The value of renewable energy (including the value of avoided carbon);
b. Local capacity value related to the applicable characteristics of the technology;
c. Avoided transmission charges, transmission losses, and ISO charges;
d. Avoided distribution losses; and
e. Any other avoided costs attributable to local renewable generation
2. A standard contract will be established and published. The term will be 20 years.
3. A program cap will be established.
4. Maximum and minimum limits on individual project sizes may be used to limit the
number of projects or the risk associated with the operation of any single project. These
may be differentiated by technology type.
5. Updates to rates, contract terms, or program size should occur at regular scheduled
intervals or should involve substantial advance notice to project developers.
6. Metering requirements will be designed to meet any applicable California Independent
System Operator (CAISO), Northern California Power Agency (NCPA), and City
operational requirements.
7. Interconnection rules will be established or modified to ensure FIT projects meet all City,
NCPA, and CAISO operational requirements. Interconnection rules may be modified on
a schedule independent of the FIT update schedule.
8. The FIT program will be designed similarly to FIT programs in other utility service areas
where desirable, reasonable and feasible.
ATTACHMENT B
EXCERPTED MINUTES OF UTILITIES ADVISORY COMMISSION
MEETING – APRIL 6, 2011
ITEM 1: ACTION: Proposed Policies and Guidelines for Renewable Energy Feed-In-Tariffs
Utilities Resource Planner Jon Abendschein provided a presentation summarizing the key points
in the development and approval process of a Renewable Feed-in-Tariff (FIT) program in Palo
Alto to meet the Long-term Electric Acquisition Plan (LEAP) Objectives for Renewable
Portfolio Standard (RPS) and Local Generation and requested that the UAC recommend Council
approve the Proposed Policies and Guidelines for Renewable Energy Feed-In-Tariffs.
During his presentation, Abendschein identified key policy and guidelines which would be used
to guide the development of the Renewable FIT program, including:
Objective of the Renewable FIT program is to meet the City’s RPS of 33% by 2015.
Initial eligible technologies would be solar photovoltaic (PV), wind, and biogas-fueled
generators.
A FIT rate based on the City’s avoided (value-based) cost and fixed for 20-years.
A standard, non-negotiable, Power Purchase Agreement (PPA).
Abendschein also touched on several program design elements and details that staff is currently
working on with other City departments and Utilities divisions related to program size and limits,
development of power purchase agreements, fees and FIT rates, and program administration.
Abendschein laid out the next steps including seeking Finance Committee and Council approval
of the proposed policies and guidelines in June 2011 and July 2011, respectively. Upon Council
approval of the policies and guidelines and development of the program details, staff will return
to the UAC, Finance Committee and Council in the fall of 2011 for approval of the Renewable
FIT Program including the PPA and FIT rate along with a request for delegation of authority to
the City Manager to execute FIT contracts.
Commissioner Melton asked why staff was pursuing a FIT for biogas-fuel generation and what
opportunities exist. Abendschein explained that biogas-fueled generation is a CEC approved
RPS technology and that it is essentially a fuel-cell that burns natural gas that has been injected
into the gas system at a different location and nominated to the specific fuel-cell generator.
Abendschein mentioned that there has been some interest in this technology in Palo Alto, but that
it was not clear whether it would be economic in the near term.
Commissioner Foster asked staff not to limit the program to the RPS of 33% by 2015, but rather
use the ½ cent premium as the cap. He asked for clarification on the list of avoided costs in the
proposed FIT policies. Abendschein clarified that the items listed were the ones staff expected to
use in developing the feed-in tariff, but that future policy changes could result in additional items
being added to the list. Additionally, Commissioner Foster asked if staff believed 4 MW of FITs
could be achieved per year and why staff was limiting the FIT technologies to PV, biogas-fueled
generators and wind. Abendschein explained that 4 MW is an optimistic projection for Palo
Alto. With regards to technology to include within the program, Abendschein explained that
staff is trying to keep the program simple in the first year of the program.
Commissioner Keller asked why staff was recommending that program be limited to a 20-year
PPA. Abendschein responded that staff will look at what other utilities are doing during the
design phase and may recommend alternative durations when staff returns for approval of the
program. Utilities Director Fong emphasized that staff is trying to keep the program simple in
the beginning and can expand features as we gain experience.
Commissioner Cook clarified that he works in the solar industry for a manufacturer of larger-
scale PV systems with the smallest size being 20 MW and therefore did not feel that there was
any conflict of interest. He also asked why staff was considering a 25% phase-in per year of the
program cap and why staff would develop different FIT rates by technology. Abendschein
explained that staff has not developed a recommendation yet for the total program cap or the
amount of capacity released each year, but merely cited 25% as an example. Abendschein
mentioned that different technologies might have different FIT rates because of the different
value each technology provides as a result of varying generation profiles. For example, PV
generation generally coincides with higher market price conditions, whereas biogas-fueled
generation is a base-load resource generating in all market price conditions. Commissioner Cook
asked whether staff was talking to other municipalities about their FITs. Abendschein said that
they were.
Chair Waldfogel suggested staff work closely with the Building Department to ensure they
understand the Renewable FIT program including how it differs from the City’s current PV
Partners program. Abendschein mentioned that staff has reached out to key staff within the
Building Department to develop a program design team. Commissioner Waldfogel asked
whether system upgrades would be necessary and who would bear the cost. Abendschein said
staff would be working with the Utilities Engineering Division to assess the need for upgrades
and define who would bear the costs.
ACTION:
Commissioner Melton motioned to recommend Council approve the proposed Renewable FIT
policies and guidelines. Commissioner Cook seconded the motion. The motion carried
unanimously (6-0) with Commissioner Eglash absent.
FINANCE COMMITTEE
DRAFT EXCERPT
Regular Meeting
June 7, 2011
Approval of Policies and Guidelines for a Renewable Energy
Feed-in Tariff
Jon Abendschein, Resource Planner, gave a presentation that included
an overview of Feed-in Tariffs (FITs), the objective of the proposed
program, and the next steps in getting the program implemented. He
said that such programs typically involve energy being “fed in” to the
grid and sold to the utility rather than used on site, and that they had
been implemented in various countries, U.S. states, and municipalities.
Several utilities in California had adopted FIT programs. Evaluating
and potentially implementing a renewable FIT program was a work
item in the Long-term Electric Acquisition Plan (LEAP) approved earlier
in 2011. The objective of the program was to fulfill part of the City’s
Renewable Portfolio Standard (RPS) from local renewable sources.
Some of the benefits of this strategy included avoiding transmission
costs and the cost of complying with other state grid operator
requirements, as well as keeping money spent on power within the
community. The proposed program was a value-based FIT program,
in contrast to a cost-based program. This meant that the program
was based on the value of the power rather than the cost to build the
generator. The Utilities Advisory Commission (UAC) had reviewed the
FIT and recommended the City Council approve the program. If the
Finance Committee and City Council approved the proposed Policies
and Guidelines, Staff would return with a detailed program for review
and approval in the fall.
Vice Mayor Yeh stated this program would provide more options for
the City to achieve its RPS goals. He asked whether the program size
was governed by the RPS limit.
Mr. Abendschein stated that the goal of the program was to fulfill the
City’s RPS program, but that the specific RPS limit was not specified in
the policy.
ATTACHMENT C
Vice Mayor Yeh asked whether the City’s market exposure would
increase if the program were fulfilled entirely with solar.
Mr. Abendschein said the amount of solar being discussed was small
and unlikely to create significant risks to the City’s portfolio, but Staff
would examine that over the following months.
Vice Mayor Yeh asked whether the rate would be fixed over the term
of the contract or if there were escalators planned.
Mr. Abendschein stated the goal was to have a fixed rate for the full
term.
Vice Mayor Yeh asked whether the program would be reviewed
annually.
Mr. Abendschein stated that the goal was to have an annual review
with the Council.
Vice Mayor Yeh asked whether the value-based FIT rate was based on
the Market Price Referent (MPR).
Valerie Fong, Director of Utilities stated that the rate was based on the
market price.
Mr. Abendschein stated it was based on previously signed renewable
contracts that were very close to the MPR.
Council Member Schmid asked whether the most recent contracts were
included in the graph of the renewable portfolio included in the
presentation.
Mr. Abendschein stated that all of the geothermal contracts and landfill
gas contracts were included.
Council Member Schmid stated that he was concerned that the method
of valuation would include older contracts that no longer reflected the
market price.
Vice Mayor Yeh clarified that if the City based the price on previously
signed contracts it could lock the rate into older contracts that involved
escalators.
Jane Ratchye, Assistant Director of Resource Management, clarified
that the price would be based on an assessment of renewable market
prices, and that the most recently signed renewables contracts were
an indicator of current market prices.
Ms. Fong stated that the rates were also reviewed annually as market
prices changed. Signed contracts maintained the same rate for the
entire term of the contract. Future contracts could have a different
rate, but existing contract rates would not change.
Vice Mayor Yeh asked whether the MPR was updated annually.
Ms. Ratchye stated the MPR used to be a good benchmark for
renewable prices but that changing regulations meant it would no
longer be updated.
Vice Mayor Yeh asked whether the City would generate its own
renewable market price estimates.
Ms. Ratchye stated it would. The Northern California Power Agency
(NCPA) looked at the renewables market frequently and was a good
source of information.
Vice Mayor Yeh asked how the time-of-day benefits were calculated.
Mr. Abendschein stated the time-of-day benefits were based on the
hourly market price for power.
Chair Scharff asked for a clarification on Guideline 1. He asked how
the avoided cost related to the calculation of the value-based FIT rate.
Ms. Ratchye stated the avoided cost was the entire basis for the FIT
rate calculation.
Chair Scharff stated the language in Guideline 1a regarding the value
of renewable energy should be clarified. He asked whether the
renewable energy value included a separate carbon price.
Mr. Abendschein stated it was included in the renewable market price.
Council Member Schmid asked whether the market price was
technology-specific or based on the market for all renewables.
Ms. Ratchye stated it was based on the market for all renewables.
Chair Scharff recommended using the words “market price of
renewable power” in Guideline 1a.
Ms. Ratchye agreed, stating if the language was not clear it could be
changed.
Vice Mayor Yeh asked whether the local benefits associated with the
FIT rate were calculated based on Staff’s estimates.
Mr. Abendschein state yes, the local benefits were based on forecasts
done for the City.
Vice Mayor Yeh asked whether these represented transmission costs
passed through to us by the California Independent System Operator
(CAISO)
Mr. Abendschein state they did.
Vice Mayor Yeh asked how roof rental would work for residential
installations.
Ms. Ratchye stated the program would not apply to residences. If the
building owner chose to rent out their roof to a developer the City
would not be a part of the contract.
Vice Mayor Yeh asked whether the Building Division would need to be
involved in potential projects to issue permits.
Ms. Fong stated that all projects would need permits.
Vice Mayor Yeh asked whether the Building Division would be involved
in the design process.
Mr. Abendschein stated the Building Division was already involved in
the process.
Vice Mayor Yeh asked whether the program would involve any
partnerships with public facilities.
Ms. Fong stated that was a program implementation issue and that the
Utilities Department was not at the stage of considering that yet.
Vice Mayor Yeh recommended that there be discussions with schools
to make sure they are aware of the program.
Ms. Fong stated a strong school advocate was on the UAC.
Ms. Ratchye stated there was discussion at the UAC regarding what
role the City should play in marketing the program. The UAC
recommended making the program streamlined, ensuring customer
awareness, but not actively connecting developers with available roof
space.
Council Member Shepherd stated she was conflicted between the cost-
based and the value-based FIT. She stated there seemed to be a
large difference between the two. She asked who the developer would
be in these projects.
Mr. Abendschein stated there could be a 3rd party renting a roof and
owning the solar panels or the facility owner could install the project
themselves.
Ms. Ratchye stated that if the value-based rate were $0.15 per kWh
but the cost to the developer was $0.16 per kWh, the developer would
not do the project. As costs came down over time, though, the project
would become economic. There had been discussion at the UAC about
paying more in order to get projects built earlier, but if the City
overpaid the cost would be borne by the electric ratepayers. Staff and
the UAC recommended the value-based approach.
Council Member Shepherd asked whether the rate would be firm.
Ms. Ratchye stated if the price was too low in the beginning no
projects would be completed, but the solar industry was stating that
costs were coming down.
Council Member Shepherd asked whether it cost more to build in Palo
Alto and whether there was any allowance for that in the rate.
Ms. Fong stated there was not because the rate was based on the
value of the energy rather than the cost to build.
Vice Mayor Yeh asked whether Staff would help potential participants
make the decision about how much value the program would provide.
Ms. Fong stated Staff provided the program but let the customers
determine whether it was economically valuable to them.
Ms. Ratchye stated a key benefit of the FIT was that it involved a
standard contract with a fixed price, which reduced uncertainty for the
developer because they did not have to wait for a Request for
Proposals (RFP).
Vice Mayor Yeh whether information would be provided to the building
owners as well as solar developers in case a building owner wanted to
develop a project and be paid for the energy.
Ms. Fong stated that the choice of whether to develop or rent the roof
needed to be made by the market.
Vice Mayor Yeh asked how the City would notify developers of the
program.
Ms. Ratchye stated that solar developers were aware of the program.
Ms. Fong stated that information on the program would be made
available to the public.
Council Member Schmid asked about Guideline 1b related to local
capacity value.
Mr. Abendschein stated that local capacity value was related to grid
stability. It had to do with standards set by the CAISO.
Ms. Fong stated that different technologies had different grid stability
values. The CAISO set requirements for how much capacity was
needed in each region.
Ms. Ratchye stated that solar and wind might count differently toward
those capacity requirements.
Council Member Schmid asked what the value of local capacity was.
Mr. Abendschein said the value was a few dollars per megawatt-hour.
Council Member Schmid asked whether the resident had to pay for
these charges. He asked whether the charge was in addition to the
14-16 cents / kWh rate discussed in the report.
Mr. Abendschein stated no, it was part of that price.
Council Member Schmid asked whether the calculation would be
transparent in the final rate calculation.
Mr. Abendschein stated it would be.
Council Member Schmid asked whether some of the other renewable
resources the City owned were able to provide local capacity value.
Ms. Fong stated that some were, and others were not.
Shepherd recommended clarifying the language in Guideline 1b.
Ms. Ratchye stated that Staff would clarify the language.
Council Member Schmid asked whether it made sense to offer a
twenty-year term when technology was changing so quickly.
Ms. Fong stated that FITs were a mechanism being used throughout
Europe. Staff was aligning this program with the way FIT programs
were done elsewhere.
Council Member Schmid asked what would happen if the rooftop
system broke down.
Ms. Ratchye stated the City only paid if the energy was delivered.
Council Member Shepherd asked whether the developer could get a
new contract if the system broke down after fifteen years.
Mr. Abendschein stated those types of contingencies would be dealt
with in the standard contract and included in the detailed plan.
Ms. Fong stated that with a flat rate the City paid more for power
earlier in the contract term and less later on. There was some
obligation by the developer to deliver in the later years.
Council Member Schmid asked if the program would be more attractive
if the City could offer shorter terms.
Mr. Abendschein stated that the UAC had recommended that Staff give
themselves the flexibility to examine shorter terms.
Chair Scharff stated that the twenty year benefited the developer. If
there were a shorter term there may be less interest.
Council Member Schmid stated it was the opposite of a business
investment encouraging people to replace the system.
Chair Scharff stated the systems that went in today would receive
higher payments, so if the system was repaired in fifteen years they
would continue to receive that payment.
Ms. Fong stated that the level of interest would not be clear until the
program was launched.
Vice Mayor Yeh said that the point was to protect the citizens’
interests. The price the City would have to pay would increase if the
solar system did not deliver in the last five years.
Ms. Ratchye stated the City paid a fixed price for the entire term of the
contract.
Ms. Fong stated this could be taken into account in liquidated damages
clauses. Staff did not have the answer ready that night.
Council Member Schmid stated that solar systems degenerated over
time.
Ms. Fong stated there would be performance requirements in the
standard agreement.
Council Member Shepherd stated it appeared similar to a ground lease,
so if the developer walked away the building owner could sign a
contract with the City.
Council Member Schmid stated he did not want to see abandoned solar
systems degrading on businesses’ rooftops. He asked if the program
provided an incentive to cut down trees to allow the solar system to
function, which would then increase the cooling costs of the building.
Mr. Abendschein stated a side benefit to the program was that the
solar panels on the building provide a cooling effect.
Council Member Schmid asked if Canopy had been consulted.
Pamela Antil, Assistant City Manager, stated the City would continue to
follow the tree ordinance when implementing the program
Council Member Shepherd asked what was meant in the guidelines by
biogas-fueled generators.
Mr. Abendschein stated the type of biogas being discussed would come
from a dairy farm. Methane generated by digestion of the waste
would be injected into a gas pipeline and directed to the generator.
Council Member Shepherd asked if that was specified in the policies
and guidelines.
Mr. Abendschein stated that the City was able to take advantage of
rules already set by the California Energy Commission (CEC) on this
topic.
Council Member Schmid asked what the rate impact of the program
would be.
Ms. Ratchye stated that this program would not cause the City to
exceed the half-cent per kilowatt-hour rate impact guideline set forth
in the LEAP for fulfilling the RPS.
Council Member Schmid asked what percent of the system average
rate that was.
Ms. Fong stated it was roughly $5 million out of an $80 million supply
portfolio.
Chair Scharff asked whether the half-cent limit would be exceeded if
the entire remaining RPS were fulfilled with through this program.
Ms. Ratchye confirmed that it would not unless the value of renewable
power goes up.
Chair Scharff stated there was no policy to that effect.
Ms. Fong stated that it was a requirement of the LEAP, meaning the
limit could not be exceeded.
Chair Scharff stated the Staff proposal was well thought out. He
recommended changing the language in Policy 1 to remove the word
“maximize.”
Ms. Fong said Staff would take out that word.
MOTION: Council Member Schmid moved, seconded by Vice Mayor
Yeh to recommend that the City Council accept the Staff
recommendation to approve the proposed policies and guidelines for a
Renewable Energy FIT program with the following modifications:
In Guideline 1a use the term “market price of renewable
energy.”
Clarify the wording in Guideline 1b.
In Policy 1 remove the work “maximize.”
MOTION PASSED 4-0